Philippines mulls sovereign wealth fund

The Philippines would consider deploying its first sovereign wealth fund taking into account the country’s sound fiscal position and deepening foreign exchange reserves, which stood at $83.8 billion in February, according to the latest data from the Central Bank of the Philippines (BSP).

“If the government decides to put up a sovereign wealth fund, we can provide the dollars. We can sell them the dollars which they can use to fund their investment operations, particularly abroad,” BSP governor Amando M. Tetangco Jr said on March 20.

“The government is looking into it [creation of the fund]; it is very much on the drawing board right now,” he added.

The move by the Philippine government to create a sovereign wealth fund could diversify the country’s investment portfolio, providing greater access to capital for developmental projects that are a priority for the region.

The BSP, however, faces legal restraints concerning how such a fund can be established, which places a hint of looming uncertainty over the plans ultimate feasibility.

“Based on the study, they [national government] will determine whether it is something the government will want to establish,” Tetangco said.

“Right now there are legal constraints for the BSP to go into something like creating the sovereign wealth fund,” he observed.

Yet, according to the central banker, the Philippines current foreign currency reserves are more than adequate to set up a fund by international benchmarks.

Foreign reserves are enough to cover for nearly one year’s worth of the Philippines’ import requirements, which is also equivalent to 6.6 times the country’s combined short-term, foreign currency-denominated debt.

The Philippines would consider deploying its first sovereign wealth fund taking into account the country’s sound fiscal position and deepening foreign exchange reserves, which stood at $83.8 billion in February, according to the latest data from the Central Bank of the Philippines (BSP).

“If the government decides to put up a sovereign wealth fund, we can provide the dollars. We can sell them the dollars which they can use to fund their investment operations, particularly abroad,” BSP governor Amando M. Tetangco Jr said on March 20.

“The government is looking into it [creation of the fund]; it is very much on the drawing board right now,” he added.

The move by the Philippine government to create a sovereign wealth fund could diversify the country’s investment portfolio, providing greater access to capital for developmental projects that are a priority for the region.

The BSP, however, faces legal restraints concerning how such a fund can be established, which places a hint of looming uncertainty over the plans ultimate feasibility.

“Based on the study, they [national government] will determine whether it is something the government will want to establish,” Tetangco said.

“Right now there are legal constraints for the BSP to go into something like creating the sovereign wealth fund,” he observed.

Yet, according to the central banker, the Philippines current foreign currency reserves are more than adequate to set up a fund by international benchmarks.

Foreign reserves are enough to cover for nearly one year’s worth of the Philippines’ import requirements, which is also equivalent to 6.6 times the country’s combined short-term, foreign currency-denominated debt.

This is a great opportunity for the economy of the Philippines, however whether or not the Central Bank of the Philippines will be able to create a sovereign wealth fund will ultimately determine future developmental projects. If a sovereign wealth fund is created it will be interesting to see how it plays out this year and how the economy benefits.